Ask Colin

Regarding insider trading and market manipulation, has the authorities ever monitored the pre-opening trades for certain stocks? At times, the pre-opening trades value a stock at least 20% higher than the last closing price. May I have your comments please?

This has been raised before on my web site - in newsletters. You are therefore not the first to observe this activity. If the orders remain in place, there would per se be no issue of manipulation. However, what I think you are trying to say is that the orders are placed pre-open and then removed before the open.

In this situation, I would think that it would opened on whether those bids affected the market. For that to happen, others would have had to follow them in and bid the market higher (anyone is free to do this and must take responsibility for their actions). There would only be a manipulation issue if the original bidders were to benefit - say by being able to offload stock to the new bidders.

The law talks about creating a false market. The usual way this is done is by trading both sides of the market. However, it can clearly also be done pre-open. Whether the law as it stands covers this is not clear to me.

Since you are concerned about this, I suggest you have a chat to the guys at the ASIC. They will be able to tell you their attitude to it. It may be that they need someone like you to give them a good case to pursue.